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Bank Indonesia Raises Key Rate By 25bp In Hawkish Surprise

INDONESIA CENTRAL BANK
BulletEM BulletEmerging Market NewsHomepage

Indonesia's central bank unexpectedly raised its policy rate (BI Rate) by 25bp to 6.00%, defying the consensus call of 30/41 economists polled by Bloomberg to keep monetary policy settings on hold. The remaining 11 dissenters correctly predicted the decision, with the rupiah garnering some strength in its immediate aftermath.

  • Governor Warjiyo described the rate hike as a pre-emptive measure intended to support the rupiah from geopolitical risks and prevent imported inflation. He also pledged to increase money market rates to bring inflows and support the IDR.
  • The official said that Bank Indonesia expects inflation to remain within the +1.5%-3.5% Y/Y range through 2024 and 2025. The central bank sees 2024 GDP growth at +4.7%-5.5% Y/Y.
  • Bank Indonesia stands ready to stabilise the rupiah through its triple intervention regime (i.e. through spot, DNDF and bond markets) and stressed that it has the means to do it in the form of ample reserves.
  • Spot USD/IDR last deals -71 figs at 16,150, while 1-Month NDF trade marginally lower at 16,164. The rupiah is the second best performer in Asia EM space after the Korean won.
  • Note that USD/IDR has recently crossed above the psychologically significant 16,000 figure for the first time since the outbreak of the COVID-19 pandemic.
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Indonesia's central bank unexpectedly raised its policy rate (BI Rate) by 25bp to 6.00%, defying the consensus call of 30/41 economists polled by Bloomberg to keep monetary policy settings on hold. The remaining 11 dissenters correctly predicted the decision, with the rupiah garnering some strength in its immediate aftermath.

  • Governor Warjiyo described the rate hike as a pre-emptive measure intended to support the rupiah from geopolitical risks and prevent imported inflation. He also pledged to increase money market rates to bring inflows and support the IDR.
  • The official said that Bank Indonesia expects inflation to remain within the +1.5%-3.5% Y/Y range through 2024 and 2025. The central bank sees 2024 GDP growth at +4.7%-5.5% Y/Y.
  • Bank Indonesia stands ready to stabilise the rupiah through its triple intervention regime (i.e. through spot, DNDF and bond markets) and stressed that it has the means to do it in the form of ample reserves.
  • Spot USD/IDR last deals -71 figs at 16,150, while 1-Month NDF trade marginally lower at 16,164. The rupiah is the second best performer in Asia EM space after the Korean won.
  • Note that USD/IDR has recently crossed above the psychologically significant 16,000 figure for the first time since the outbreak of the COVID-19 pandemic.